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What is the accounting treatment for negative goodwill of an associate in consolidation?
Value of the investment in the Consolidated Statement of Financial Position is “Cost + share of Assoc post acq retained – any impairment in the investment” In the event of negative “goodwill” on the acquisition of an investment in an associate – no adjustment. Cost + share of post acq – any impairments (W5A) means that no accounting treatment is necessary for the negative “premium on acquisition”
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Thank you Mike!
Do you write it off immediately to the Statement of Comprehensive Income?As per IAS 28 any negative goodwill (gain on bargain purchase) should be included as an income in the determination of “Entity’s share of the associate’s post acquition profit and loss” in the year of acquition. The journal entry for the same would be
Investments in Associates A/c (Dr.)
Consolidated SPL A/c (Cr.)
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